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Philippine Financial System
Transcript of Philippine Financial System
Philippine Financial System
late 1970s and early 1980s
a number of policy reforms were initiated to strengthen the system, but financial crises in 1981 and 1983 short-circuited their full effect. The financial community has undertaken recovery efforts since 1986.
Philippine National Bank
-Created in 1916
-provide agricultural credit for export crops
-has 25 to 30% of commercial bank assets
As the result of the accumulation of nonperforming assets, by 1987 the asset share of the Philippine National Bank had fallen by half.
three specialized banks in 1991
1. Development Bank of the Philippines
for postwar rehabilitation
70% of loans were allocated to industry.
-offshore banking as been allowed to do business in the Phil.
-Domestic banks have been allowed to take foreign -currency deposits and lending.
1948 until 1980
The Central Bank extensively regulated the commercial banking system and engaged in considerable rediscounting activity.
The History of Philippine Financial System Financial System is like the heart of the human beings
banking institutions and nonbank financial intermediaries, including commercial and specialized government banks, thrift and rural banks. It is also composed of offshore banking units, building and loan associations, investment and brokerage houses and finance companies.
Financial System is composed of:
The Central Bank and the Securities and Exchange Commission maintained regulatory and supervisory control.
- there were 20 privately-owned domestic banks and 4 branches of foreign banks engaged in commercial banking
Since the passage of the
General Banking Act of 1948
, foreign investment in banking has been limited to 40% of domestic bank equity.
Total assets of the commercial banking system in 1988 were about
2. Land Bank of the Philippines
financed land reform programs
3. The Philippine Amanah Bank
served Muslims in Southern Phil.
-Large banks with a net worth of at least P500 million could engage in expanded commercial banking, or "unibanking," combining commercial and investment banking activities.
-instigation of the World Bank and the IMF
there were eight unibanks, including the Philippine National Bank.
liberalization had occurred when interest rates shifted from being administered to being market-determined.
The Malacañan Palace interfered in loan decisions regarding state-owned banks
It was argued that a market-determined interest rate would make such behavior less rewarding and more difficult.
Assassination of Benigno Aquino
- economic and political crisis that occurred
-virtual collapse of banking industry
1983 & 1985
Larger banks suffered loss from large peso devaluation
-Commercial bank loans slightly increased
-fell by 30% after 2 years
-inflation rate was almost 80%
-2 largest intermediaries , PNB and DBP
nonperforming assets of PNB & DBP were transferred to the government
The domestically owned commercial banking sector became more concentrated
1950s-1980s 5 largest private commercial banks has 35% total assets
1988-ratio risen to 55%
six largest commercial banks earned an estimated P7.9 billion in after-tax profits
an increase of 42 percent over 1989
A 1991 World Bank memorandum noted that the extent of bank profits indicated a "lack of competition" and a "market structure for financial services characterized by oligopoly.
Philippine banks had the widest interest rate spread in Southeast Asia.